CVS Profit Jumps, Lifted by Drug Benefit Business -- Update

By Ben Fox Rubin 

CVS Caremark Corp. said its first-quarter profit jumped 18% as its growing specialty pharmacy business helped boost revenue.

Shares, however, fell about 2% premarket after the company failed to reach its earnings outlook for the quarter, despite having boosted those expectations in February.

The pharmacy chain said this year that it would stop selling all cigarettes and tobacco products nationwide by October, saying they have no place in a drugstore company that is trying to become more of a health-care provider.

The move reflects a big push by retail pharmacies away from simply dispensing drugs toward a broader role of providing basic health services to Americans, including millions of newly insured, amid an expected shortage of primary care doctors.

CVS Caremark reported a profit of $1.13 billion, or 95 cents a share, up from $954 million, or 77 cents a share, a year earlier. Excluding special items, per-share earnings rose to $1.02 from 83 cents. The company expected adjusted earnings of $1.03 to $1.06 a share.

Revenue grew 6.3% to $32.69 billion, compared with estimates of $32.31 billion from analysts polled by Thomson Reuters.

Revenue in its pharmacy services business grew 10% to $20.2 billion. The increase was primarily driven by growth in the company's specialty pharmacy business, including its acquisition of Coram, as well as drug cost inflation, new clients and new products. CVS in January completed its purchase of Coram, a provider of infusion therapies, for $2.1 billion.

On the retail side of the pharmacy business, revenue rose 2.7% to $16.5 billion. CVS said the pharmacy services and retail pharmacy segments both benefited from the impact of increased generic drugs dispensed and slower growth in expenses.

The drugstore-operator and pharmacy-benefits manager in December said it was forming a joint venture with Cardinal Health Inc. to source generic drugs, a key issue for the industry as consumers increasingly are using the less-expensive medicines.

For the current quarter, the company predicted $1.08 to $1.11 a share in adjusted earnings, compared with $1.09 a share expected from analysts. The company also backed its full-year guidance.

Write to Ben Fox Rubin at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires